Flexible ISAC law to offer client solutions
First published in The Royal Gazette, Legally Speaking, June 2019.
Final consultations are now taking place in respect of the Incorporated Segregated Accounts Companies 2019 (Bill), which is expected to appear on the statute books soon.
The draft Bill is the result of a collaboration between the Bermuda government and private sector participants. This article assumes that the legislation, when enacted, will be in substantially the same form as the draft Bill.
The ISAC Act has been on the legislative agenda since Governor John Rankin announced in his Speech from the Throne on September 8, 2017 that incorporated segregated accounts legislation would be drafted, tabled and enacted.
It is a standalone piece of legislation and a companion statute to The Segregated Accounts Companies Act 2000 (SAC Act).
Bermuda has been a pioneer in developing cell company structures and concepts. The Bermuda cell company regime initially took the form of Private Acts and subsequently progressed through the promulgation of the SAC Act, which enables assets and liabilities of a segregated account to be legally separate from both the assets and liabilities of the company’s general account and the company’s other segregated accounts.
A key feature of both a segregated accounts company and an incorporated segregated accounts company is that the assets of each individual segregated account, or cell, will not be available to the creditors of any other cell.
Moreover, it is possible for individual cells to be subject to winding-up proceedings while the ISAC or SAC, as the case may be, and the other cells remain unaffected.
Under the SAC Act, the statutory divisions between accounts do not create separate bodies corporate.
The ISAC Act, conversely, is distinguished by the creation of separate bodies corporate.
As with segregated accounts of a SAC, it will be possible for ISACs and their incorporated segregated accounts to contract with one another and/or the ISAC itself.
Each ISA will have its own board of directors, separate from the board of the ISAC (though there is no prohibition on common directors sitting on both ISAC and ISA boards).
In keeping with separate legal company status, an ISA will be able to hold assets, sue and be sued in its own name and otherwise have many of the attributes of a non-cellular company.
ISACs enable corporate group structures to be created, but with lower administration costs than a traditional group of non-cellular companies.
Due to the process of creating incorporated cells, ISACs will provide robust segregation of assets and liabilities.
ISACs will be governed by the requirements of the Companies Act 1981 (except where otherwise provided in the ISAC law) and licensed and regulated appropriately as an insurer or a fund.
The ISAC adds further dimension to the segregation of assets in Bermuda. Providers may wish to expand the range of their services by offering them through the medium of both a SAC and ISAC structure, in order to cater to the circumstances of particular clients.
In this way, the ISAC is a new corporate cell structure that is flexible, and which offers a wide range of solutions to clients.
The introduction of the ISAC Act meets today’s demands for flexibility and speciality, serving to strengthen our Bermuda offering and products including rent-a-captives, life insurance and ILS.
